Defining and selecting independent directors

Abstract

Drawing from the Enlightened Shareholder Theory that the author first developed in 2011, this theoretical paper with practical and normative ambitions achieves a better definition of independent director, while improving the understanding of the roles he fulfils on boards of directors. The first part defines constructs like firms, Governance system and Corporate governance, offering a clear distinction between the latter two concepts before explaining the four main missions of a board. The second part defines the ideal independent director by outlining the objective qualities that are necessary and adding those subjective aspects that have turned this into a veritable profession. The third part defines the ideal process for selecting independent directors, based on nominating committees that should themselves be independent. It also includes ways of assessing directors who are currently in function, as well as modalities for renewing their mandates. The paper’s conclusion presents the Paradox of the Independent Director.